The two talked for 20 minutes on the sidelines of a forum at a Chinese resort, Boao, on Hainan island.

Siew told Mr. Hu that he was an old hand on Taiwan's economic issues. Siew said he hopes the two sides can strengthen economic cooperation.

Mr. Hu said he was happy to exchange ideas with Siew on the cross-strait economy.

The meeting was described as the highest-level direct contact between Taiwan and China since they split during a civil war in 1949.

A senior U.S. diplomat, Deputy Secretary of State John Negroponte, said Friday this could be a good way forward in efforts to settle the differences between the rivals.

Siew is attending the Boao Forum on Hainan as the head of a Taiwan-based foundation, Cross-Strait Common Market Foundation.

The meeting could mark the beginning of a shift in relations between the two sides, which deteriorated while former President Chen Shui-bian and his pro-independence Democratic Progressive Party controlled Taiwan.

Taiwan's President-elect Ma Ying-jeou and his political running mate Siew will be sworn into office in Taipei next month, on May 20. Their landslide election victory in March is seen as a result of their pledge to promote closer economic ties with China, despite the two sides' political differences.

Economic ties between Taiwan and China are increasingly close, but political differences have made it difficult for any high-level contacts between the two sides.

Beijing regards the island of Taiwan as a rogue province of China, and has threatened to use force if the island takes any formal steps toward independence.